Questions for Proponents of Economic Justice

We are starting to hear the terms “economic justice” and “social justice” being thrown about. While the terms are new, the concepts are about 100 years old and were developed by a gentleman named Karl Marx. While Mr. Marx may have been pure in his desire to help the poor and working class, and may have truly believed his Marxists society would be a utopia, his philosophy has been proven in practice to lead to misery and suffering. It has also been employed by various dictators, from Stalin, to Pol Pot, to Ho Chi Mihn, and now to Kim Jung Il and Kim Jung Un to control a population by taking away their ability to take care of themselves.

It starts with stirring up envy against the wealthy in society. Note the term, “economic justice” infers that working people and the poor are being cheated and all that is wanted is what is fair and just. The poor and middle class are told that they are being cheated by the wealthy. That the wealthy have gained their fortunes through nefarious means and that this wealth is somehow a cause of poverty for others. Note that in America only 30% of poor households have anyone in them that works, while the vast majority of wealthy households have two workers.

Most of the people who have become wealthy have also done so by charging a fair price, making only a small amount from each customer, and by paying fair wages, making less that one-fourth per hour from each worker than the worker makes. The reason they became wealthy is that they served so many customers, making their lives better, and they employed so many people, providing many jobs.

Now I know that I’ll never convince a dyed-in-the-wool Marxist that Capitalism is actually fair and just and that Marxism will lead to misery. The reason this is so is that Capitalism brings out the best in people by aligning their self-interest with providing for others and treating them fairly. Marxism, on the other hand, is all about one’s self-interest and one “wins” by earning less than one receives. This system therefore leads to greed, envy, and a decline in production. After all, if I produce more than I consume, I won’t make out as well as someone who consumes more than he produces. Staunch Marxists, however, either have a world view that will never see business owners as good or are using Marxism as a way to gain power for themselves.

Still, perhaps there are some recent college graduates who have been told for the last four or five years that capitalism is the source of all of society’s woes and that if we just raise taxes and take stuff from the wealthy society will be better off. If this is the case for you, please consider the following questions and maybe calculate some numbers. I think you’ll find things are actually pretty fair and that the wealthy don’t take advantage of the poor or their customers:

1. How often do you buy something and not think it is worth at least what you paid for it?

2. How do business owners come to “control the means of production?”

3. Who pays the salary for the CEO of corporations?

4. How much money does the average McDonald’s employee make for the company per hour?

5. If the salary of the CEO of McDonald’s were split equally among all employees, how much of a raise would they get per hour?

6. What return on investment do current shareholders of McDonald’s get?

7. How does the salary of the CEO affect the salary of the workers?

Readers are encouraged to answer these questions for themselves in a comment. Marxists and economic justice proponents are especially welcome to weigh in, but you must answer the questions – not just provide the talking points. I’ll provide a response to each question as well in a future post. Perhaps some of you Marxists out there will be able to show the unfairness and how the poor can be lifted up by reducing CEO salaries and taking money from the wealthy. If you think you can, please do. I’d love to see how.

Disclaimer: This blog is not meant to give financial planning advice, it gives information on a specific investment strategy and picking stocks. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Published by smallivy

Post navigation

2 comments

The main issue here there is that many people don’t realize what a CEO’s job really is. The manager of a store is there to make sure customers’ expectations are being met, so why do you need a CEO? And why in the world does he get paid so much? The McDonald’s CEO doesn’t care (directly) about how many burgers are being ordered or how happy the customers are, his job is to make money for investors and therefore make money for the company in the form of the stock price.

This brings up an important point about stocks/companies in general that I think a lot of people don’t understand: Why would a company care so much about stock price/performance that they pay someone $40M just if they (as CEO) raise it $2 in a year? I think this might be a good question to base one of your articles off of, but the basics is that the owners of the company and MANY employees are shareholders. Lower ranked employees usually consider this exclusive to management only, but anyone can be a shareholder of a public company and often all full time employees have some option to obtain discounted stock. So an increase in $2 with 1 billion shares outstanding (about what MCD is at) just made shareholders $2B, many of them being founders of the company and upper management and board members.

Another thing to consider is that CEO pay is often inflated a bit. They say he made $40M but he actually made $10M (for example) and was given stock options that MIGHT be worth $30M in the future. This is done to make sure CEOs want the stock price to go up as much as the other shareholders do, but people need to understand that he will only make that $40M in a few years IF he performs well. If he doesn’t, sure he still makes a ton of money, but he just got fired because his job is very high pressure.

Actually I do think that many CEOs are overpaid, in that you could find someone who could do just as competent a job for maybe 1/10th of what some of these CEOs get. In some ways it is a rock star mentality, where you could probably pay $10,000 and get several singers who are just as good or better at singing as Mick Jagger to sing at your wedding, but you would need to pay probably $500,000 or more if you actually wanted Mick Jagger to sing at your wedding. It is true that a great CEO might make more than an average CEO for shareholders, but we also saw option strike prices being quietly adjusted down in 2000 and 2008 after share prices fell because, we were told, that we would lose CEOs if we didn’t, so they sometimes get paid even if they don’t make more money for the shareholders.

The point though is that the CEO and the front line employees are both paid by the shareholders. Just because the shareholders are overpaying the CEO doesn’t mean the front line employees are underpaid. Paying the CEO more doesn’t take abything away from the front line employees, just the shareholders.

Search SmallIvy.com

Search for:

Join the Wealth Revolution

Enter your email address to follow this blog and receive notifications of new posts by email. By clicking the follow button below, the user agrees to the data use policies and terms and conditions described in the About page.

Join 1,278 other followers

Help keep The Small Investor going! Just shop Amazon through these links and buy things you'd buy anyway: